China taps markets for $10 billion to bolster clean technology supremacy

Three Chinese EV battery and equipment companies are attracting investors for more than $10 billion in new financing as the country solidifies its dominance over global clean technology supply chains.

China’s Contemporary Amperex Technology, the world’s largest battery manufacturer, completed the world’s second-largest stock market transaction this year this week, as a wave of battery and rare earth companies race to meet soaring demand.

The combined fundraising effort by the three Chinese groups — CATL, Tianqi Lithium and Huayou Cobalt — overshadows the hundreds of millions of dollars being spent by Washington and key US allies, including Australia and South Korea, to squelch China’s supremacy in the sector. .

“China is trying to position itself as the Saudi Arabia of clean-tech hardware, the supplier with the lowest costs and highest market share,” said Neil Beveridge, senior analyst at Bernstein in Hong Kong. “This is a huge geostrategic competition between China and the west.”

Factories in China currently account for nearly three quarters of global EV battery production. The superpower has a 90 percent market share for processing rare earth elements — the oxides, metals and magnets used in batteries — a level of dominance comparable to its stronghold over the solar industry.

CATL, a major supplier to Tesla and homegrown Chinese automakers such as Geely, began its private placement of Rmb45 billion ($7 billion) last week, pricing its shares at Rmb 410 per share on Wednesday. Including the latest jumbo stock sale, CATL has raised about $13 billion since it was listed in Shenzhen in 2018, according to calculations by the Financial Times and data from Refinitiv.

Foreign investors were eager to participate. JPMorgan, Barclays, Morgan Stanley, Macquarie and HSBC all picked up a share from the jumbo sale, accounting for about 32 percent of the total number of shares offered.

Shenzhen-listed Tianqi Lithium, one of the world’s top producers of lithium chemicals for electric vehicle batteries, aims to raise $1 billion to $2 billion in a secondary listing in Hong Kong, according to an investor close to the company state.

According to Dealogic, the fundraiser will be this year’s largest at the Hong Kong stock exchange, even in its lowest range. Shares of mainland Tianqi are up more than 21 percent since early June.

Hong Kong-listed Huayou Cobalt, another major Chinese raw material supplier, plans to raise up to Rmb 17.7 billion through a private substitute. Most of the new money will be used to expand production at its joint venture in Indonesia, where it processes nickel, a critical material for EV batteries.

Also, according to Trafigura, more than 90 percent of the world’s battery-grade lithium is produced in refineries in China, which also process the vast majority of cobalt and nickel, other important battery materials.

The West is slow to respond to China’s dominance. Earlier this month, the US Department of Defense signed a $120 million deal with Australia-listed Lynas Rare Earths to build one of the first domestic US heavy rare earth separation facilities. In February, the Australian government granted a $100 million loan to Hastings Technology Materials for the development of a rare earth mine and refining plant in Western Australia.

Capacity (GWh) bar graph showing catching up: China still dominates global battery market in 2025

As demand for EV grows, global battery capacity is expected to grow 40 percent annually through 2025, from 823 GHh in 2021 to 3,252 GWh, according to Bernstein’s predictions. China’s EV battery capacity market share will decline marginally as the US and Europe offer generous subsidies to build factories closer to their automakers, but will still be around two-thirds by 2025.

Europe’s footprint will increase to 20 percent from 15 percent today, and the US to 12 percent from 8 percent. CATL will maintain its current global market share of 20 percent through 2025.

However, China’s cost advantage will improve. Factories built in China cost about $60 million per gigawatt hour per unit, thanks to their sheer scale. But it will shrink even further in the coming years, to about $50 million/GWh, as the size of the factories grows rapidly.

That equates to a global average of approximately $78 million/GWh over the next 10 years. The cost of new European battery factories is already 120 million dollars/GWh.

Ross Gregory, of advisory New Electric Partners, said competitor concerns about Chinese rivals extended beyond geopolitical risk to the difficulties of competing with the country’s massive domestic demand for EV batteries.

“It’s not just a fear that China would act blatantly, it’s just a fact that they have huge local demand,” Gregory said.

South Korean companies, including CATL rivals LG, SK and Samsung, are among those racing to reduce China’s reliance on critical battery materials from more than 60 percent today.

But as a sign of the allure of China’s cheap batteries, the Kia brand of Korean auto group Hyundai plans to use CATL batteries in a new EV, marking the first time non-Korean batteries will hit the domestic market. used.

Additional coverage from Song Jung-a in Seoul and Neil Hume in London

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